California was the first of the 50 states to announce its withdrawal from national negotiations with the Big Banks over their mortgage practices which gained widespread public attention since the folding of the housing market.
The national negotiations had been in the works for nearly a year when California’s state Attorney General (AG) Kamala Harris made the decision to quit. California was the hardest hit in the nation by the housing crisis, Harris explained, and the estimated $20 billion settlement being offered by the Big Banks was “inadequate” in addressing the state’s housing grievances.
During just the 11-month period of AG-lender negotiations, more than 160,000 homes were foreclosed in California. The number of California cities on the list of the nation’s top-ten cities with the greatest volume of foreclosures jumped from five to eight. [For more information on Harris’ decision to pull out of the deal with the Big Banks, see the letter issued by the State of California Office of the Attorney General.]
A central point of contention over the settlement for Harris – as well as for AGs from New York, Delaware, Massachusetts and Nevada – was a broad liability waiver being sought by the banks to cover any claims related to past and future mortgage practices.
Harris announced the state AG’s office will continue its independent investigation of mortgage fraud cases. Meanwhile other state-organized coalitions such as Californians for a Fair Settlement continue to demand an agreement with the banks for a principal reduction for underwater homeowners. [For more information on California’s Mortgage Fraud Strike Force, see the May 2011 first tuesday article, Presenting the Mortgage Fraud Strike Force – at whose service?]
first tuesday take: For brokers to be in on this act (which they are not), would be encouraging. They are the gatekeepers. They are the confidants of homeowners and buyers. Yet they stand totally silent when all hell is breaking loose around them and new paths are being paved.
AG Harris’ defiance of the lender’s “broad legal waiver” (read: loophole for the banks) is refreshing – quite a California-sized statement. Of course it will be more refreshing if brokers jumped in on behalf of their clients – activism that actually helps clients for a change. [For more information on the banking industry’s prior mortgage settlements, see the July 2011 first tuesday articles, Payday cometh … for BoA’s investors and Too big to fail or too rich to fail?]
Brokers and agents know California’s real estate is in mental rigor mortis. But they’ve been too stricken by a severe case of housing fear, insecurity and paralysis to collectively do anything. They are frightened, to the point of silence.
So take Harris’ decision to kick the lenders into shape as a signal to pump some life and energy into the real estate market with this news: homeowners don’t have to be forced to just take what they can get and agents cannot merely follow along.
As we’ve seen with the Occupy Wall Street (OWS) protests of late, a little off-the-beaten-path trailblazing can turn repeatedly ignored issues into pressing issues for the public, policymakers and legislators. Occupy the Big Banks to better focus. So observe, and send your buyers to the local community bank for that purchase-assist loan they need to close escrow. At some point brokers and agents will see the future, but it is happening damn slowly. [For more information on the recent demonstrations against Wall Street, see the October 2011 first tuesday article, Unions Occupy Wall Street – where are the Realtors?]
RE: “California Quits States Talks with Banks” from the NY Times